UAA Working Group has elaborated a draft law regarding provision of judicial support to international arbitration by the Ukrainian courts
Dear colleagues,
We hereby inform you that the Ukrainian Arbitration Association Working Group I has completed the second stage of work on elaboration of draft amendments to certain laws of Ukraine (regarding judicial support to international commercial arbitration).
On this stage the UAA Working Group I worked jointly with the Working Group of the Ukrainian National Committee of International Chamber of Commerce (ICC Ukraine).
The Draft, developed by joint efforts of the two working groups, follows up and complements the Draft amendments to the legislation of Ukraine on arbitration in a part of judicial control, prepared by the UAA Working Group I at the end of last year. Upon discussions of the provisions of the new Draft within the arbitration community of Ukraine, the two drafts will be combined into a single document.
The new Draft is developed with the aim to fill the gaps in the legislative regulation of such issues as types and application of interim measures in support of international commercial arbitration, procedure for court assistance in taking of evidence for arbitral proceedings. Presently there are no rules in procedural legislation of Ukraine regulating these issues, which in practice makes it impossible for the courts to provide any such assistance or support irrespective of the seat of arbitration; meanwhile, provisions of Articles 9 and 27 of the Law of Ukraine “On international commercial arbitration” are not sufficient for the above purposes.
This dramatically hampers the development of arbitration in Ukraine and leads the parties to decline arbitration in favour of national courts, where the procedures for application of interim measures as well as securing of evidence are clearly regulated.
In the event of its adoption, the Draft will ensure further development of international commercial arbitration in Ukraine, formation of the arbitration-friendly court practice and establishment of the positive image of Ukraine as a favourable seat of arbitration.
Below there follow most substantial amendments to the legislation of Ukraine, proposed under the Draft.
- The Draft provides that functions of judicial support to international arbitration will be performed by the two judicial instances – the Kyiv Court of Appeal and the High Specialized Court of Ukraine for Civil and Criminal Cases
Appointment of a sole court of appeal for the purposes of resolving relevant issues (which under the original Draft was also competent to conduct judicial control for the purposes of international arbitration) will foster improvement of the quality of the court practice in relevant cases, concentration of the knowledge and experience gained from deciding specific issues in the field of international arbitration in a sole court, which decisions would be subject to appeal only with the High Specialized Court of Ukraine for Civil and Criminal Cases. Also, timeframes of relevant court proceedings would become more predictable for the parties, as compared to a situation when such applications may be considered in all courts of appeal of Ukraine, whose caseload in each case may vary substantially. With respect to determining such a court, the most suitable one is the Kyiv Court of Appeal, which has most extensive experience in arbitration-related matters. Available facilities and resources as well as geographical location thereof speak in favour of appointing this court for resolving cases connected with international arbitration. In addition, appointment of a single court would allow avoiding jurisdictional issues.
- The Draft provides for the possibility to submit a request for interim measures in support of international arbitration after commencement of arbitral proceedings
In this matter the Draft follows the logic of the procedural legislation of Ukraine, according to which such interim measures may be obtained only after the submission of the claim. The exceptions provided under the procedural legislation of Ukraine as to application of interim measures prior to the submission of a claim do not apply to the case of international arbitration.
- The notification of respondent about the consideration of the application for interim measures
The Draft mirrors general rules established under the Civil Procedure Code of Ukraine and provides for consideration of a respective application only after notification of the person against whom the interim measures are sought. At the same time, in the event of a substantiated request of an applicant and in the case of an emergency for application such measures and/or if notification of a person, against whom interim measures in support of international arbitration are sought, would otherwise defeat the purpose of the interim measures, application for the interim measures in support of international arbitration may be considered without notification of the person against whom the interim measures in support of international commercial arbitration are sought.
- Cross-undertaking/security
By analogy with the draft amendments to the Commercial Procedure Code of Ukraine elaborated in course of the judicial reform, the Draft introduces the concept of "cross-undertaking/security" (a security transferred to the deposit account of the court, or a bank guarantee), provision of which by the applicant is a prerequisite for obtaining interim measures.
The amount of the cross-undertaking/security shall be determined by the court taking into account the circumstances of the case and has to be sufficient to prevent the abuse of the interim measures.
In any case the amount of the cross-undertaking/security shall not exceed 20% of the injunction requested by the applicant, and if such amount is not indicated – not more than 20% from the amount of claim in the arbitral proceedings.
The mechanism of cross-undertaking/security is available in many jurisdictions and is applied as follows: if the court passes the ruling granting requested injunction, the entry into force of such a ruling is subject to the provision by the applicant of the cross-undertaking/security, or alternatively the ruling in question becomes ineffective if the requested cross-undertaking/security is not provided. However, for Ukrainian procedure legislation such mechanisms with "contingent" and "resolutive" conditions are non-typical.
Therefore, in order to ensure the balance of interests of the both parties, the Draft provides the two-tier process: first, the court ruling for cross-undertaking/security is passed and then the ruling on the interim measures in support of international arbitration is granted. The first ruling is adopted only if the court makes positive decision on granting the interim measures in support of international arbitration, in other words, the applicant is aware of the fact that the requested measures would be obtained if the conditions of the ruling for the cross-undertaking/security are fulfilled. In the ruling for cross-undertaking/security the court outlines the parameters of the future interim measures: type of interim measures and substantiated reasons for the choice thereof, the procedure of carrying out the interim measures, type and amount of the cross-undertaking/security, procedure and timeframe for granting thereof. The particularity of this ruling is that (1) it is not subject to compulsory enforcement and (2) may not be appealed independently from the ruling for interim measures in support of the international arbitration.
There are two possible scenarios: the applicant either provides or not the cross-undertaking/security within the time limits established by the court. The Draft sets forth that completeness, timeliness and due provision the requested cross-undertaking/security shall be subject to the court’s control upon the results of which the court shall without summoning of the parties either (1) pass a ruling for applying interim measures in support of the international arbitration (subject to the restrictions set therein) or (2) quash a court ruling for cross-undertaking/security.
- Change or discharge of the interim measures in support of international commercial arbitration
The Draft provides that change or discharge of the interim measures in support of international arbitration shall be conducted subject to general procedure established under Article 154 of the Civil Procedure Code of Ukraine with certain peculiarities which take into account the specific nature of the international arbitration and are determined to prevent any abuse on the part of the applicant after interim measures were granted to the latter (mainly, by delaying arbitral proceedings).
- Compensation of damages caused by interim measures in support of international commercial arbitration
The Draft provides that in the event of discharge of interim measures, the person against whom such measures in support of international arbitration are introduced, shall be entitled to compensation of the damages caused by such measures except insofar as the parties have signed a settlement agreement. The compensation in question shall be decided in a judicial procedure – by the same court that has ruled for application of the measures –largely by means of the cross-undertaking/security.
- Court Assistance in taking of evidence in support of international commercial arbitration
The Draft establishes the procedure for implementation of the provisions of Article 27 of the Law of Ukraine “On International Commercial Arbitration”, according to which the arbitral tribunal or, upon its instructions, the party to arbitral proceedings, may submit an application to the state court for assistance in taking of evidence for arbitral proceedings.
In many countries, inter alia, Switzerland and the USA, such assistance by the state court is rendered by the same procedure as for execution of rogatory letters of foreign courts, irrespective of international conventions. The Working Group has decided to undertake the same approach. Thus the Draft provides that the court assistance in taking of evidence in support of international arbitration shall be granted by the same procedure as set forth under Article 417 of the Civil Procedure Code of Ukraine with certain peculiarities which account specific nature of international arbitration.
The request of the arbitral tribunal shall take the form of the ruling and shall be subject to official certification by the permanent arbitration institution administering the respective arbitral proceeding (in case of institutional arbitration) or competent authority exercising assistance in respect of this arbitral proceeding (in case of ad hoc arbitration).
Such request shall be performed not later than 30 days following the date of its receipt by the court. The above period may be extended by the court if it is necessary for the purposes of carrying out the requested procedural actions.
- Court fees
Taking into account the complexity of the issues related to the court support to international commercial arbitration, the Draft provides for quite high court fees for this category of cases: for consideration of the application for interim measures in support of international commercial arbitration – 40 statutory established minimum wages and for submission of a request for court assistance in taking of evidence – 20 statutory established minimum wages.
Full text is available at the following link
We will be grateful for commentaries and suggestions, which you may forward to the coordinator of the Working Group – Olena Perepelynska (olena.perepelynska@integrites.com)
Sincerely,
Ukrainian Arbitration Association